ISTANBUL — Border conflicts, slowing GDP growth, rising inflation and terrorist attacks have sparked concerns that fewer travelers might visit — and shop — in Turkey, the world’s sixth most popular tourist destination. But domestic spending and the country’s resilient retail sector are expected to help mitigate a drop in foreigners’ consumption, industry observers say.
Sales to visitors to Turkey last year dropped by 8.4 percent, for a total loss of $2.3 billion, even as arrival numbers held relatively steady, declining by less than 1 percent, according to the Turkish Statistical Association.
This disparity points to an ongoing concern for the country, according to economist Emre Deliveli, who also owns a hotel in the Mediterranean resort town of Marmaris.
“That’s the biggest problem with Turkish tourism. Even when the numbers were increasing, revenues per tourist didn’t increase that much,” he said.
According to the Turkish Statistical Institute, foreign visitors to Turkey spend on average $715 a person during a trip. Economic woes in top tourist-sending countries like Russia threaten to bring that figure down further.
“Russians may still come to Turkey but their shopping will drop,” said Selim Seyhun, Turkey managing director for Global Blue, which specializes in services and tax-free shopping for foreign visitors. “They may do fewer transactions or spend less on each one. They may just go to an all-inclusive hotel in Antalya [a Mediterranean resort traditionally popular with Russians] and never leave.”
In 2014, Russian shoppers’ spending in Turkey was exceeded only by those from Iran and Azerbaijan, said Seyhun, whose firm measures sales figures at well-known Turkish brands such as Beymen and Silk & Cashmere, as well as international labels like Emporio Armani and Ralph Lauren.
By 2015, Russian shoppers had fallen to the number-six spot on Global Blue’s list. And in January, after political disputes between Ankara and Moscow led to the suspension of visa-free travel between the two countries, Russia didn’t even crack the top 15, Seyhun said.
Tourism officials have brushed aside concerns about the drop in Russian visitors, whose arrival numbers were down by almost 47 percent in December compared to the same prior-year period, saying increased visits and spending by other groups will more than make up for the loss.
Turkey is particularly banking on tourists from the Middle East, who have flocked to the country in recent years and have proven to be strong spenders, especially on luxury goods.
“Over 2.5 million Arab tourists visited Turkey last year and spent more than $4 billion,” Bandar bin Fahad Al-Fehaid, president of the Arab Tourism Organization, told attendees at an investment summit in Antalya this month.
That amounts to $1,600 a visitor, more than double the average tourist spend.
Chinese tourists also hold promise for retailers in Turkey, according to Global Blue’s Seyhun, who said total duty-free sales to Chinese shoppers grew 165 percent in 2015 and appear to still be on the rise.
“There is a long way for this to grow. The Chinese are the leaders in international shopping, making up to 40 percent of total tax-free sales in Europe,” he said. “In Turkey, this figure is only 6 percent so far. I believe we will have major growth from the Chinese in the future, but we need to better understand their shopping behaviors and their culture in order to serve them better.”
Although tourism spending is important to Turkey as a whole, the health of the retail sector “is going to depend more on what’s happening domestically than what’s happening with tourism,” said economist Deliveli.
“Despite all the news and inflation being up, people are still spending and the retail sector is growing,” said Günöz Atakan, secretary general of the Council of Shopping Centers — Turkey, or AYD, whose member malls represent more than 70 percent of the country’s shopping-center sector.
The group’s most recent index, measuring sales at some 50 AYD-member malls around Turkey, showed a 13.8 percent rise in revenues in 2015 versus 2014.
Domestic consumers are the main focus for Mavi, Turkey’s number-one manufacturer of jeans and one of the country’s best-known brands internationally.
“Only five or six of our stores [out of nearly 300 in Turkey] are doing a high tourist trade,” said Mavi chief executive officer Cüneyt Yavuz, who also serves as vice president of the United Brands Association, or BMD. The group’s 150 members are mostly homegrown and include marquee Turkish brands such as Beymen and Vakko.
“Overall our members are content with how things went in 2015, and so far it’s been a good start to the new fiscal year for Mavi,” Yavuz said.
Domestic investors in the retail sector are likewise helping make up for wariness among foreign players, according to AYD’s Atakan.
“International investors are a bit quiet because they want to wait and see what happens,” he said. “But they are missing an opportunity, as local investors are jumping in.”
He said 10 to 14 new shopping malls are set to open across Turkey in 2016, compared to 20 in 2015.
Demand in Turkey for retail, the country’s fourth-largest sector, appears strong despite slumping consumer confidence, said Jake Grant, senior consumer analyst at London-based BMI Research.
“Particularly in fashion, consumers are increasingly looking for one-stop shops,” he added, noting that H&M Turkey’s full-year sales for 2015 were up 64 percent as the company nearly tripled its number of stores countrywide. “These figures hint at the large growth opportunities for international fast-fashion brands. Turkey’s clothing manufacturing base is helpful in this regard.”
Overall, Grant said, “we expect continued resilience in this sector.”
Resilience is one of the key advantages that Turkish companies have over their competitors, said Mavi’s Yavuz.
“We are used to dealing with crisis. Overnight 100 percent currency devaluations have happened three times in my lifetime,” he said. “Turkish brands have the agility to adapt. I think we can come out a couple of years down the road in an even stronger position.”